from the New York Fed
Timely information on small business financing needs, decisions and outcomes is critical to understanding and fostering the sector’s health and growth.
To provide these insights to policymakers, researchers and service providers, the Small Business Credit Survey is a national collaboration among the 12 Reserve Banks of the Federal Reserve System. In 2016, it yielded 10,303 responses from small businesses with employees, or employer firms, located in 50 states and the District of Columbia.
Results from the 2016 survey showed that while many employer small businesses were profitable and optimistic in 2016, a significant majority faced financial challenges, experienced funding gaps and relied on personal finances.
Below are some of the key findings from the report:
Similar to 2015, a majority of firms reported that they were profitable and had growing revenues in 2016.
Employer Firm Performance Index | |||
|---|---|---|---|
| 2014 SURVEY | 2015 SURVEY | 2016 SURVEY | |
| Profitability | 10% | 30% | 27% |
| Revenue growth | 19% | 29% | 21% |
| Employment growth | 11% | 18% | 17% |
TABLE NOTES
61% of employer small businesses faced financial challenges in the last year.
Top Financial Challenges | |
|---|---|
| ALL FIRMS | |
| Credit availability or securing funds for expansion | 44% |
| Paying operating expenses | 36% |
| Making payments on debt | 25% |
| Purchasing inventory or supplies to fulfill contracts | 17% |
| Experienced none of these challenges | 39% |
The most common way employer firms coped with financial challenges was by self-funding.
Actions Taken As A Result Of Financial Challenges | |
|---|---|
| ALL FIRMS | |
| Used personal funds | 76% |
| Took out additional debt | 44% |
| Made a late payment | 44% |
| Cut staff, hours and/or downsized operations | 43% |
| Negotiated terms with lender | 21% |
| Did not pay – debt went to collections | 8% |
Most firms – 55% – sought $100,000 or less in financing.
Total Amount Of Financing Sought | |||
|---|---|---|---|
| ALL FIRMS | SMALL FIRMS (REVENUES ≤ $1M) | LARGE FIRMS (REVENUES > $1M) | |
| ≤ $25K | 20% | 28% | 3% |
| $25K-$100K | 35% | 42% | 22% |
| $100K-$250K | 19% | 16% | 25% |
| $250K-$1M | 18% | 12% | 31% |
| > $1M | 8% | 3% | 18% |
Personal assets and personal guarantees are commonly used to secure debt, even among larger firms.
Collateral Used To Secure Debt | |||
|---|---|---|---|
| ALL FIRMS | SMALL FIRMS (REVENUES ≤ $1M) | LARGE FIRMS (REVENUES > $1M) | |
| Personal guarantee | 58% | 55% | 67% |
| Business assets | 49% | 42% | 65% |
| Personal assets | 37% | 37% | 37% |
| Portions of future sales | 9% | 9% | 9% |
| None | 12% | 14% | 7% |
60% of applicants had a financing shortfall, meaning they received less than the amount they applied for.
Total Financing Received | |||
|---|---|---|---|
| ALL FIRMS | SMALL FIRMS (REVENUES ≤ $1M) | LARGE FIRMS (REVENUES > $1M) | |
| All | 40% | 33% | 55% |
| Some | 36% | 38% | 31% |
| None | 24% | 29% | 14% |
Banks are the most common source of credit. Smaller firms also frequently turn to online lenders and other sources.
Credit Sources Applied To | |||
|---|---|---|---|
| ALL FIRMS | SMALL FIRMS (REVENUES ≤ $1M) | LARGE FIRMS (REVENUES > $1M) | |
| Large bank | 50% | 49% | 52% |
| Small bank | 46% | 42% | 53% |
| Online lender | 21% | 26% | 12% |
| Credit union | 11% | 13% | 4% |
| CDFI | 6% | 7% | 3% |
| Other | 20% | 22% | 16% |
Successful applicants reported greatest satisfaction with small banks and credit unions.
Lender Satisfaction | |||
|---|---|---|---|
| SATISFIED | NEUTRAL | DISSATISFIED | |
| Large bank | 61% | 24% | 15% |
| Small bank | 80% | 15% | 5% |
| Online lender | 46% | 35% | 19% |
| Credit union | 78% | 19% | 3% |
| CDFI | 77% | 22% | 1% |
Source
https://www.newyorkfed.org/smallbusiness/small-business-credit-survey-employer-firms-2016
